I think some misunderstood my post about "Mandatory"! My post refers to the Servicer/Lender not to the borrower. The reason why the HAFA program came about is because under HAMP, very few mortgages were being modified. Over 50% of borrowers never responded back to their lender to pursue a loan mod. So far the program is a total failure in helping people stay in their homes. HAFA is just another alternative (under HAMP) program to allow the borrower to short sale the property(must be preapproved by the lender) or give up the deed and walk away. Which in turn the lender is required(mandatory) to compensate the borrower $ . Plus forgive the deficiency judgement. If the borrower went through a loan mod. already and was found to not be qualified it's usually because no real hardship exists.
HAFA provisions:
* Eligible homeowners are those who acquired the home as a principal residence before Jan. 1, 2009 and have a mortgage balance no larger than $729,750.
* The owner's monthly mortgage payment(PITI) as well as homeowner association dues, must exceed 31% of their income, and homeowners must prove financial hardship-loss of income, an increased mortgage payment or other unexpected expense.
* Eligible homeowners also must have been previously considered for other federal foreclosure prevention options, including a refinancing or mortgage mod.
* Instead of having a buyer in hand, homeowners can get preapproved for a short sale before the property is listed, provided the lender agrees upon a minimum acceptable short-sale amount,
* Homeowners who successfully sell short can get up to $3K to help defray moving costs after the deal is don. Loan servicers can get up to $1500. to help cover costs of the deal. Loan servicers can use some of the loan proceeds to buy out subordinate lien holders with payments of up to $6K, provided the subordinate lien holder agrees to releasing the lien and freeing the homeowner of all liability.
* The lender can't require a cash contribution from the homeowner, nor can the lender require that the owner sign a promissory note at the closing. The lender also cannot go after the borrower for a deficiency judgment based on the difference between the selling price and the last mortgage balance-as has been the case.
* If the short sale fails, the program comes with a backup deed-in-lieu-of foreclosure option, where the owner hands over the property to the bank with the same cash incentives.
* The Government's directive excludes loans excludes loans that are owned or guaranteed by Fannie Mae or Freddie Mac.
* The homeowner must sign a short sale agreement or DIL agreement on or before Dec. 31, 2012.
* The home must be listed for sale with a licensed local-area real estate professional. (Doesn't apply to DIL).
* The homeowner must cooperate with the real estate agent's efforts to sell the home and maintain the interior and exterior of the home.
* The servicer and homeowner must meet a number of time frames.
* The homeowner cannot have a close business or personal relationship with the real estate agent or buyer and cannot have an expectation of buying back or renting the home after the short sale or DIL closes.
* The lender may require the homeowner to make full or partial payments on the mortgage, up to 31% of the homeowner's income, subject to the lender's written policies.
* The lender can initiate or continue, but not complete a foreclosure sale while the homeowner is involved in the program.
* The buyer in a short sale can't resell the home within 90days of the purchase.
There you have it. For me, I see alot of Mandatory, rules, regulations and procedures that must be followed by both the Servicer/Lender as well as the homeowner under both programs. Personally, if you asked me to be your buyer agent in one of these deals, I would politely ask you to find another agent. For whatever it's worth. Most of these pre-approved short sales that I have seen aren't really deals at all, unless, of course you don't mind paying an at market price. Good Luck, Hope this info. helped.
